Another solid quarter, more confident outlook

ISAT delivered strong 2Q26 results, posting double-digit yoy growth in both revenue (+14%) and EBITDA (+14.2%). This performance was driven by higher ARPU, a resilient subscriber base, and new AI revenue streams. Following these results, management raised its FY26 growth guidance and outlined a more aggressive capex strategy. Although elevated capex will increase operational costs and raise the bar for top-line growth, we remain confident in ISAT's underlying resilience. Maintain BUY with a TP of IDR 2,800 (5x FY26F EV/EBITDA).

Extending the trend of solid performanceExtending the trend of solid performanc

Extending the trend of solid performance

Robust operational metrics. Total subscriber base stood at 93.4 mn in 2Q26 (vs. 93.5 mn in 1Q26). Meanwhile, blended ARPU grew +1.8% qoq and +19.5% yoy to IDR 46k, and data traffic rose +1.6% qoq and +15% yoy. These robust operational figures reflect continued market repair, driving a more conducive industry environment. Cellular data revenue (after discounts) increased by +15.8% YoY to IDR 11.2tn. Additionally, the MIDI segment posted +19.4% YoY growth, largely attributed to a USD 17mn revenue contribution from AI Neocloud.

Stable margins and bottom-line expansion. With operating expenses broadly well-maintained, the company booked 2Q26 EBITDA of IDR 7.36tn (+14.2% yoy, +1.6% qoq), translating to a margin of 47.7% (+10 bps yoy). Furthermore, ISAT completed the divestment of a 55% stake in its fiber assets, securing IDR 11.7tn in cash and booking an IDR 1tn (net of tax) monetization gain. Consequently, net profit reached IDR 2.8tn, while core profit stood at IDR 1.8tn (+75% yoy, +22.8% qoq; generating an 11.6% NPM).

Updated guidance: more confident outlook and… Backed by solid 1H26 achievements and continued market repair, management holds a more confident outlook for 2026. The company upgraded its full-year guidance from ‘mid-to-high single-digit’ to ‘close-to-double-digit’ growth for both revenue and EBITDA. We maintain our 2026 forecasts, projecting ISAT’s revenue and EBITDA to grow by +8.0% yoy and +7.8% yoy, respectively.

Entering massive capex cycle

...aggressive capex spending plan. Management revised its 2026 capex guidance upward to IDR 23tn (from IDR 13tn previously, with 1H26 capitalized capex at IDR 9.5tn). This expanded budget includes approximately IDR 10tn dedicated to 5G rollout. In the recent spectrum auction, ISAT secured 20 MHz in the 700 MHz band and 60 MHz in the 2.6 GHz band. Over the next five years, spectrum winners are obligated to provide: a) 4G mobile broadband in designated areas, and b) 5G mobile broadband covering at least 51% of the national population. Furthermore, the company has allocated roughly USD 446mn (~IDR 8tn) in 2H26 specifically for AI Neocloud GPUs.

Aiming to be leading AI-tech company in Indonesia. ISAT initiated its AI cloud and GPU-as-a-service investments in 2024, booking USD 28mn in revenue in 2025 and USD 33 mn in 1H26. The company projects FY26F AI revenue to reach USD 100 mn, targeting >USD 300mn in annual recurring revenue with an 80% EBITDA margin over at least the next three years. In addition to its standalone investments, ISAT has joined forces with Ooredoo Group, Nokia, and NVIDIA to develop Zankore, a dedicated AI compute and neocloud platform targeting 1 GW of NVIDIA DSX AI factory capacity in Indonesia. Ooredoo will act as the lead investor with a 49% stake, committing USD 800mn in equity, while the remaining 51% stake will be shared among ISAT, Nokia, and NVIDIA. Assuming Nokia and NVIDIA each take a 5–15% share, ISAT’s implied ownership would be 21–41%. Consequently, we estimate ISAT will need to allocate approximately USD 320–640mn (IDR 5.76–11.5tn, assuming a USD/IDR rate of 18,000) to fund its stake in the Zankore venture.

Maintain BUY with TP of 2,800/sh

Despite an upgraded growth guidance, we decided to leave our projection unchanged. The IDR 11.7tn one-off cash received may not able to fully cover the aggressive capex plan; the company may need to raise debt for funding. Significant capex deployment will increase finance cost from both lease and loan obligations, which will pressure bottom line.

We are waiting for further clarity on a) Zankore investment allocation, and b) progress on aggressive capex plan. We maintain our BUY recommendation with a same target price of IDR 2,800/sh. Our target price (reflects 5x EV/EBITDA 2026F) is derived from a 5-year DCF with the following assumptions: a discount rate of 11.6% and a terminal value of 2%.

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